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By Michael Greene
Nov. 26 — The Council of Institutional Investors says that Delaware's “well-deserved reputation for fair principles of corporate law” may be at risk if the state's legislature does not overturn or narrow a recent court decision that allows corporations to unilaterally adopt fee-shifting bylaws.
In a Nov. 25 letter, CII said that “if corporations are allowed to continue to unilaterally adopt fee-shifting provisions under the authority of the ATP Tour decision, the Delaware judiciary’s leadership role will diminish over time as fewer important business disputes will be brought before Delaware courts.”
CII asks the Delaware State Bar Association to formulate and recommend a proposal to the Delaware General Assembly that would either overturn or narrow the Delaware Supreme Court's decision in ATP Tour Inc. v. Deutscher Tennis Bund.
Responding to a certified question in May in ATP Tour, the Delaware Supreme Court found that fee-shifting provisions in the bylaws of a Delaware non-stock corporation can be enforceable.
According to CII's letter, this decision could cause a decline in corporate accountability to long-term shareholders and leave corporate officials more insulated from meritorious legal challenges.
Jeff Mahoney, CII's general counsel, told Bloomberg BNA that the association remains optimistic about potential action. He added that actions by the Delaware legislature and the Securities and Exchange Commission “could be very positive with respect to [preventing] other jurisdictions and companies from adopting these types of provisions.”
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CII's letter is available at http://www.cii.org/files/issues_and_advocacy/correspondence/2014/11_25_14_CII_letter_DCC.pdf.
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